Task1. Keyser Mining is considering a project that will need the purchase of $980,000 in new equipment. The equipment will be depreciated straight-line to a zero book value over the seven year life of project. The equipment can be scraped at the end of project for 5 percent of its original cost. Yearly sales from this project are estimated at $420,000. Net working capital equivalent to 20 percent of sales will be needed to support the project. All of the net working capital will be recouped. The required return is 16 percent and the tax rate is 35 percent.
problem1. What is the value of depreciation tax shield in year 4 of project?